Stocks fell in January as rising bond yields, elevated
inflation, and a hawkish-sounding Fed
took turns roiling the market.
The Dow Industrials lost 3.3 percent,
while the S&P 500 Index dropped more than 5 percent.
The Nasdaq was hardest hit, falling 9 percent. Anxiety
about the Fed's next moves hung over the market all month.
Investors were caught off guard when policymakers
suggested that the first rate hike could
come as early as March.
Volatility picked up and bond yields
trended higher in response to the Fed's tightening signals.
Amid the turbulence, reports suggested
the economic recovery was intact,
but hot inflation tempered enthusiasm.
Stocks rallied sharply in the final two sessions,
taking the edge off an otherwise challenging month for investors.
In the month ahead,
expect investors to continue to focus on quarterly reports
from the high valuation growth companies.
As investors saw in January, these high-multiple stocks
can come under pressure as bond yields trend higher.
The reason for this is two-fold.
When rates tick up, it's more difficult to forecast
future earnings,
and second, higher rates may increase
a firm's cost of capital.
On February 14, romantics everywhere
will be treated to love notes and gifts.
What you might not know is that thousands of loving letters
are also sent to Verona, Italy, addressed
to Shakespeare's "Juliet."
Each year on Valentine's Day, the Juliet Club
awards the "Dear Juliet" prize to the author of the most
touching love letter.
It seems Shakespeare was right:
"Love alters not with his brief hours and weeks"...
...or even with international zip codes.